Marc Lasry’s Avenue Capital Group has disclosed its equity positions at the end of 2014 in a recent filing with the SEC. While there’s been a change at the top of Lasry’s portfolio, there has generally been little movement among his top choices during the past quarter. In fact, if we look all the way back to his filing one year ago, for the fourth quarter of 2013, we see three of his top five positions then are still on the list today.
Avenue Capital was founded by Lasry and Sonia Gardner in 1995, who previously founded Amroc Investments together. With a focus on distressed debt investments and undervalued equity opportunities, the fund has grown to manage $13.2 billion in assets under management as of the end of January, 2015. With its emphasis on undervalued opportunities, it’s not surprising to hear that the fund has been raising capital for the purposes of making a splash in the depressed energy sector, where many stocks have depreciated considerably since last summer as oil prices have crashed.
YRC Worldwide Inc (NASDAQ:YRCW) has moved to the top of Lasry’s portfolio in terms of value, though the holding remained unchanged during the past quarter at 7.27 million shares. The stock’s strong quarter (up 8.59%), coupled with a decline in the overall value of Lasry’s equity portfolio (to $1.08 billion from $1.17 billion) led to YRC’s total percentage of the portfolio moving up to 15.09% from 12.58%.
YRC Worldwide Inc (NASDAQ:YRCW) is one of the companies that has benefited directly from the slumping oil prices, and was up over 30% in 2014 as a result. Through its holding companies YRC Freight, YRC Reimer, Holland, Reddaway, and New Penn, YRC Worldwide operates one of the largest less-than-truckload delivery networks in North America.
As reported on February 5, YRC Worldwide Inc (NASDAQ:YRCW) generated $5.07 billion in consolidated operating revenue in 2014, up from $4.87 billion in 2013, and operating income rose more than 50% to $45.5 million from $28.4 million. The biggest shift was seen in the YRC Freight division, which generated a $0.5 million operating income after losing $31.2 million in 2013.
YRC Worldwide Inc (NASDAQ:YRCW) was not one of the three companies in Lasry’s top five a year ago, as he initiated a position on it during the first quarter of 2014, in the midst of shares taking off.
Houghton Mifflin Harcourt Co (NASDAQ:HMHC) drops to the second spot in Lasry’s portfolio, as he sold off a hefty 30% chunk of his position, 2.53 million shares, in the fourth quarter. His remaining 5.74 million shares still place him as one of the largest shareholders among institutional investors in the book publisher, which has a high institutional ownership rate of 106% propping it up.
Houghton Mifflin Harcourt Co (NASDAQ:HMHC) emerged from bankruptcy two years ago and relaunched as a public company at the end of 2013, and Lasry was one of the first investors on board, grabbing 11.52 million shares, which immediately pushed it to the top of his portfolio. Houghton enjoyed a strong early run, rising to $20 from its $12 IPO price within two months, but has mostly leveled off since.
The publisher has enjoyed success through a renewed focus on digital educational offerings, as well as educational entertainment offerings for pre-school and kindergarteners. However, the stagnating share price has resulted in pressure being exerted from activist investors, as a fund affiliated with Geoffrey Raynor’s Q Investments sent a letter to the company’s Board of Directors towards the end of 2014, calling for a more aggressive return of cash to shareholders, and improvement on shareholder value.
Meritor Inc (NYSE:MTOR) moves up to third, and is the only position Lasry increased during the fourth quarter out of those in his top five. He added 461,909 shares to his portfolio, giving him 7.81 million total, a 6% increase. While Meritor did not make Lasry’s top five a year ago (it was seventh), he was extremely bullish on it during that quarter, increasing his holding by 93%. Meritor responded with a very strong 2014, up 57.2% in 2014.
It did however dip to a low of $9.93 in early October, which may have been around the time Lasry decided to pad his position slightly. Meritor’s Letter to Shareowners filed with the SEC on December 5 showed that Lasry owned 9.21 million shares at the time, so he had increased his position significantly during the previous two months, and would end up selling 1.4 million of those shares off by the end of the year, as shares rebounded to close the year at $15.15.
Meritor Inc (NYSE:MTOR) was undoubtedly Lasry’s most lucrative equity position in 2014, and one he continues to have faith in heading into 2015. The supplier of parts and logistics for the trucking industry has come out with a number of revolutionary new products in early 2015, including its Aftermarket Programming Tool to speed up the process of configuring new electronic control units, as well as the MTIS™ Tire Inflation System for Trucks, which automatically monitors and inflates tires as needed.
Dynegy Inc. (NYSE:DYN) is another position Lasry made a fairly large cut to, trimming it by 29% during the fourth quarter. He sold 1.11 million shares, leaving him with 2.62 million shares of the Houston, Texas-based coal and gas-power generation company, which operates in five states.
Dynegy Inc. (NYSE:DYN) is another position Lasry has held for some time, opening it during the fourth quarter of 2012, after the company left bankruptcy protection. This was another of Lasry’s top performing stocks in 2014, returnign 40.51% on the year.
However indicators suggest it’s starting to pick up some bearish sentiments, which may have triggered Lasry’s trimming. The stock’s 50-day moving average dipped below its 200-day moving average recently, a signal known as the “death cross”, and Zacks downgraded the stock to ‘Underperform’ on January 30, with a price target of $26.50, below its Friday close of $28.39.
Scorpio Tankers Inc. (NYSE:STNG) is the final entry on our list, and fifth in value within Lasry’s equity portfolio. Lasry initiated a position on Scorpio Tankers during the second quarter of 2013, and on its sister company Scorpio Bulkers Inc (NYSE:SALT) in the fourth quarter of that same year (also the same quarter as that company’s IPO). Lasry’s position in Scorpio Tankers was unchanged, at 6.41 million shares.
Scorpio Tankers Inc. (NYSE:STNG) has not provided the same value as some of Lasry’s other investments, losing 26.42% during 2014, as the marine transportation company that transports crude oil and refined petroleum, with a fleet of 65 tankers, has been hit hard by the sliding oil prices, as must stocks in the energy sector have.
Despite a recent earnings estimate forecast that of $0.10 to $0.14 per share for the fourth quarter, below analysts estimates of $0.18, both Credit Suisse and Canaccord Genuity have raised their price targets on the stock, to $14 and $11 respectively, with Canaccord upgrading its rating on Scorpio Tankers to ‘Buy’. Scorpio Tankers Inc. (NYSE:STNG) closed on Friday at $8.29, and will announce its fourth quarter results on March 2.
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